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You are here: Home / Archives for business planning

Lease vs. Own: A Company’s Guide To Having Its Own Building

April 7, 2022 by Susan Paige Leave a Comment

A company building is an essential element for any business. It’s where you’ll run your major operations and where your clients will come to see you. When it comes to an office building, you can decide to lease or own it. With leasing, you’ll take ownership of the building for an agreed period, beyond which it ceases to be yours. On the other hand, owning means that you construct your building or buy it as a whole, transferring its total ownership from the previous owner to you. In this article, owning will refer to constructing rather than buying a building. 

How will you know the best choice for your business between these two options? This article will guide you by discussing each option under various aspects. Read on for the insight! [Read more…]

Filed Under: business planning

5 Reasons Your Business Needs Expense Management Software

March 22, 2022 by Susan Paige Leave a Comment

Typically, expenses play a crucial role in running a business. They’re considered an outflow of money used to sustain your day-to-day company operations. However, managing business expenses can be complicated and confusing if done traditionally. Keeping track of every cost can be challenging with all the manual processes involved and paper receipts and invoices. Hence, using expense management software should come into play.   [Read more…]

Filed Under: business planning

Pros and Cons of Self-Employment

March 2, 2022 by Jacob Sensiba Leave a Comment

self-employment

The number of businesses that have started since the start of the pandemic has shot through the roof. People realized how short life can be and decided to take their earning potential and work-life into their own hands. Here are a few stats to illustrate the self-employment picture in the U.S.:

  • As of 2019, the self-employed section of the population accounted for nearly 30% of total employment (Source).
  • As of November of 2021, there are 9.9 million self-employed people in the United States.
  • 96% of self-employed people don’t want regular jobs (Source)

Business structures

Sole proprietorship – There is no separate business entity. You are the business entity. That means your assets and liabilities are your assets and liabilities. Banks are more hesitant to lend to sole proprietors than they are for other entity types.

Partnership (LP/LLP) – An limited partnership (LP) has one general partner with unlimited liability and all the other partners have limited liability. Creditors can come after all of the general partner’s assets including things they personally own. Limited liability partners can only lose what they put in. A limited liability partnership provides limited liability to all partners. Profits are paid through on personal tax returns, except for the general partner – they must pay self-employment taxes.

LLC – Very similar to the LLP in terms of how profits, losses, and liabilities are treated. Profits are passed through to employees on personal returns. However, members of the LLC are required to file and pay self-employment taxes. 

Retirement plan options

As a self-employed individual, you have a few options when it comes to retirement accounts – Traditional IRA and Roth IRA (available to everyone), SIMPLE IRA, Solo 410(k), and SEP IRA.

Traditional IRA and Roth IRA – Contribution limits up to $6,000 ($7,000 if you’re 50 and older). Withdrawals prior to 59 ½ are subject to a 10% tax penalty unless certain conditions are met.

SIMPLE IRA – available to employers with fewer than 100 employees. Contribution limits up to $14,000 ($17,000 if 50 or older). Employer match available.

Solo 401(k) – Contribution limit is $61,000 ($67,500 if 50 or older). Available to self-employed individuals and self-employed individuals that have their spouse as their only employee.

SEP IRA – Contribution limit is 25% of employee compensation up to $61,000.

Click here for more information about business retirement plans.

Be your own boss

You get to set your own hours and work with whoever you want to. There’s no one to tell you what to do and how to do it. For people that like to make their own schedule and like to go to the beat of their own drum, self-employment makes a lot of sense.

Earning potential

There’s no ceiling on your earning potential. You don’t have a salary range, you make what you make. You can make $10,000 or you can make $10 million. That’s a double-edged sword though, your effort determines your income. You will only make money if you work for it. Someone who isn’t a self-starter, should not be self-employed.

Costs

You have to pay for everything. Whatever the cost of business is for your sector or industry, that’s on you. Health insurance, you have to pay for that. There’s no business or employer that can foot those costs for you. Same with your retirement plan, a lot of employers offer an employee match. If you’re the business owner and the employee, ALL of your contributions are your responsibility.

Related reading:

6 Ways to Save Money When You’re Self-Employed

How to Be Self-Employed Safely and Wisely

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

Jacob Sensiba
Jacob Sensiba

My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com

 

www.crgfinancialservices.com/

Filed Under: business planning, Personal Finance, Planning, Retirement, Small business, Tax Planning Tagged With: Business, business planning, Business Services, Retirement, retirement plan, retirement planning, Self-employment

6 Financing Strategies For Business Growth

December 13, 2021 by Susan Paige Leave a Comment

There are several strategies to enhance operations and sales if your company has reached a position where growth should be a top concern. In such instances, the extra funding necessary is the first that comes to mind. It can be a challenging journey for most business owners, especially those encountering obstacles.

[Read more…]

Filed Under: business planning

How to Lower Business Expenses Without Compromising Quality

June 12, 2021 by Justin Weinger Leave a Comment

If you simply think about cutting expenses alone, then you’re going about conserving your funds in the wrong way. In addition, you’re likely to create headaches for yourself, such as damaging your brand image and disrupting the quality of your products and services.

A smarter way to cut your business expenses is to reorganize your business to make it more efficient and productive.

When you look at lowering your business expenses systematically, you’ll notice something interesting: this approach not only improves cash flow but also improves the quality of your business operations.

Naturally, the better you run your business, the more money you will make and the faster it will grow.

The key idea to keep in mind here is this: if you can cut your business expenses strategically, you’ll improve the quality of your business.

Some rather straightforward ways to do this include outsourcing technical work, increasing the efficiency of business operations, and decreasing overhead costs by identifying and eliminating waste.

Let’s take a closer look at these various options.

  1. Outsource technical jobs.

You don’t always need to hire full-time or part-time people for everything. You can outsource some of your work. Certain work, specifically technical work that can be done online, could be delegated to independent contractors.

You can save a considerable amount on your labor costs by hiring people from all over the world. Many are subject matter experts at the technical work you need to get done.

Consider using global employment services to find workers overseas. They will find people with the technical skills that you need for high-quality work. Often, you can hire someone from another country at a lower fee because of the economic discrepancy between different countries.

Start outsourcing in a small way to familiarize yourself with the process.

To ensure high-quality work, don’t simply hire someone because of the lower cost of hiring them. You also need to screen them. Do they have the knowledge and skill you need to get the job done quickly and well? Carefully review portfolios of promising candidates and ask for samples of their best work.

  1. Improve the efficiency of your operations.

You may be wasting more money than you realize on inefficient operations. Review your most important business operations and brainstorm ways that they could be done quicker, cheaper, and more efficiently going forward.

Here are some examples of what to review:

* Compare the price of the different vendors who supply the goods or services you need to run your business. Is it possible to switch vendors? You may be able to get the same or similar goods or services at a lower cost.

* Notice if you have too many unnecessary steps in some of your business processes. This could be a waste of time and money. Is it possible to streamline this business process?

* Evaluate the productivity levels of your staff. Is it possible to boost productivity by providing in-house training? Although this would initially increase costs, a more skillful team will do everything better and faster. This, of course, will improve profits.

  1. Reduce wasting money on unnecessary overhead costs. Your business may be spending more on overheads than necessary. Do a line-by-line analysis of your overhead costs to detect waste that you can either minimize or eliminate. For example, perhaps energy costs may be unnecessarily high because you are using antiquated lighting systems or your trash collection could be changed to bi-weekly or monthly because you focus on additional recycling and sustainable kitchenette and bathroom products at the office.

Think of ways to go green. For example, by getting solar panels installed, you could dramatically reduce all your energy costs.

Besides improving energy efficiency, there may be many more instances when you overlooked creeping costs. For example, you may never have taken the time to notice how much money you were throwing away on things that you didn’t need at all.

The Bottom Line

When you tally up how much money you save by taking these three steps, you might decide to review your business costs quarterly.

If you don’t periodically monitor creeping costs in a variety of things–things like labor efficiency, supplier pricing, and wastage–then you will be increasing costs and reducing profits.

Filed Under: business planning

Are Business Gifts Tax Deductible?

January 20, 2021 by Jacob Sensiba Leave a Comment

How do you strengthen relationships with customers and/or business partners? A tried and true way is using gifts. However, gifts cost money, so the next question is, are business gifts tax deductible?

The straight answer is yes, but it’s much more nuanced than that.

There are limitations

Business gifts are tax deductible, up to a certain dollar amount. You can deduct no more than $25 of the cost of the gift you give to each person through the course of the year.

Incidental costs such as engraving, packaging, and shipping are not included in the $25 limit as long as it doesn’t add substantial value to the gift.

Gifts that cost $4 or less are not included in the $25 limit IF the company name is permanently placed on the item and the gift is widely distributed.

Entertainment

Any item that can be considered a gift or entertainment is usually considered entertainment and is deducted at 50% of the value of the gift. For purchases that fall under both categories, use the “gift deduction” on lower-cost items and the “entertainment deduction” on items larger than $50.

Gifts to others

If you and your spouse give gifts to the same person, you’re treated as one taxpayer. The same rule applies to partnerships.

Gifting to a customer’s family counts as a gift to that customer, unless the customer’s family member(s) is a client as well.

The $25 limit only applies to gifts given to individuals. Gifts given to other companies, generally, don’t apply and are fully tax deductible.

Gifts to employees are taxable compensation.

Other relevant information

Keep adequate documentation that includes the purpose of the gift, what was spent, the date of purchase, and the business relationship.

Gifts given to a 501(c)3 non-profit are tax-deductible. Up to 25% of taxable income for a corporation.

A large majority of the information I have listed above came from the IRS publication about “Gift taxes”.

Related reading:

Some Often Overlooked Tax Deductions for Business Owners

 

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

Jacob Sensiba
Jacob Sensiba

My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com

 

www.crgfinancialservices.com/

Filed Under: business planning, Small business, Tax Planning, tax tips Tagged With: business tax, gift tax, Tax, tax deductible

How Much Cash Is Needed to Start a Pawnshop?

January 6, 2021 by Jacob Sensiba Leave a Comment

So you want to start a pawnshop. Where do you start? What do you buy? How much is this all going to cost?

A pawn shop can be a very cash-positive business. While doing research for this post, I stumbled onto a Quora thread that showcased how much money can be made with such an operation. The profits ranged from $30,000 per year to $60,000 per month.

But, you have to get started. In today’s post, we’ll highlight what you need and what it’s going to cost.

What do pawn shops do?

First off, we have to talk about what a pawnshop actually does. Pawnshops buy, sell, and trade items. These items can come from the owner’s personal collection, something they acquired via purchase or something they acquired via loan collateral.

When someone comes to a pawn shop to borrow money, they have to bring something of value for collateral. When the pawnshop lends money to this individual, they retain that valuable item until the principal (plus interest) is repaid. If they fail to repay, the pawnshop keeps the item.

Legal and location

There are many things you need to obtain when you start a pawnshop.

You need to take care of the legal requirements first. This includes licenses, articles of incorporation for your business entity, and permits.

Licenses include pawnbroker’s license, precious metal dealer license, secondhand dealer license, Federal Firearms License (if you plan on selling firearms) from the ATF.

The next thing you need is space. Where you set up shop is an important decision. The right location can bring in a lot of traffic and improve your earning potential. However, the right location comes at a cost.

Areas with high foot traffic cost more. Often, pawnshops will choose a space that’s close to a popular area, far enough away that it’s not too expensive, but close enough to make it convenient for the consumer.

Assets

There’s a minimum asset requirement needed to open. That number depends on the municipality, state, and country you plan on setting up shop in. For example, Texas has a $150,000 minimum requirement.

What do you need?

After you have all of the proper licenses and permits and pick where you’ll operate, you need to buy things to be operational.

These items include a computer (computer system/network), cash register, signs, equipment to display your products, record keeping, insurance, lockable cases, and a state of the art security system.

What you’ll also need is an adequate amount of capital to purchase more inventory and lend money to consumers.

What’s going to cost

Depending on the size of your pawnshop and the anticipated foot traffic, your start-up costs will vary. If you’re a larger shop with a high probability of having a lot of visitors/customers, your starting capital could be between $50,000 and $75,000. A smaller shop with lower projected traffic can get by with $15,000.

Last bit of advice

When you start a pawnshop, you need to refine and learn some new skills. You have to educate yourself on how to assess the value of goods so you can acquire sellable items, but not at a cost that eats into your profit margin.

Also, you have to come up with a business plan. What interest rate will you charge on your loans? How much will you mark up the items you sell? How much are you willing to pay for inventory?

All of these questions need answers. Keep in mind, this planning process should take place prior to buying the necessary licenses and other items to get the business started.

Related reading:

3 Ways to Get Financing for your Small Business

4 Ways to Use Business Loans

Some Often Overlooked Tax Deductions for Business Owners

Business Retirement Plan Guide

 

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see website for full disclosures: www.crgfinancialservices.com

Jacob Sensiba
Jacob Sensiba

My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com

 

www.crgfinancialservices.com/

Filed Under: business planning, Insurance, money management, Personal Finance, Planning, Small business Tagged With: Business, capital, cash, Cost, license, location, pawnshop, permit

Appreciating vs. Depreciating Assets

October 7, 2020 by Jacob Sensiba Leave a Comment

appreciating and depreciating assets

 

I think it’s widely known that there are two types of assets: appreciating and depreciating. I think it’s less known what’s classified as appreciating and depreciating.

In this article, we will look at what each term means, examples of each, and how to use them effectively.

What’s appreciation?

Appreciation is the increase in value. The majority of assets used to accumulate and grow wealth, appreciate. An asset can appreciate because of supply, demand, or a change in interest rates.


 

What’s depreciation?

Depreciation is the exact opposite. It’s the loss of value. The most common example is a car, but more on that later.

It is a new year and time to start thinking about tax plans for this financial year. The tax depreciation schedule calculator is a simple online tool that allows an employer to calculate the depreciation value of vehicles used for commercial purposes. This tool can help employers who wish to ensure that the correct amount of tax is deducted from their staff’s wages and prevent any penalties from being handed out.

Appreciating assets

  • *Stocks – It’s commonly known that investing in stocks is the best way to not only keep pace with inflation but to grow your wealth. A stock is partial ownership in a public company. Popular examples include Apple, Amazon, Facebook, etc. (Click here to learn more about stocks)
  • Real estate – Single-family homes, duplexes, apartment complexes, etc. Though the pace at which real estate appreciates dwarfs compared to stocks, it does so slightly over time. (Source)
  • Private equity – This can be starting a company of your own or you can invest in a startup. There are also private equity funds that exist, as well. Basically, it’s a company or venture that is not open to the public (i.e. stocks on the exchange, etc.).
  • Alternative – Less common assets that could appreciate (cryptocurrencies, precious metals, art, and other collectibles).
  • Bank accounts – Savings accounts, certificates of deposit, etc. These don’t appreciate much, especially in the current “low-interest-rate”. Some may argue that you shouldn’t classify these as appreciating assets because inflation erodes away the purchasing power over time.

Depreciating assets

  • Cars
  • Boats
  • Furniture
  • Equipment
  • Patents/Copyrights – Patents, other than section 197 intangibles, have a useful life of 10 years and can be amortized over that 10 year period. (Source)

What’s the point?

  • Appreciating assets – Owning and investing money in an appreciating asset is the key driver in growing your wealth. Those who’ve accumulated significant amounts of wealth have done so by earning a living, saving, and investing diligently over decades.
  • Depreciating assets – There are a few reasons to own a depreciating asset.
    • Fun and convenience – We own and drive cars because we need them to go places. We buy boats because they are fun. In either case, you could also own a car or boat for your business, in which case it would serve a different purpose.
    • Business – Owning and operating machinery and equipment is how many of us make a living or run a business.
    • **Tax write off – If you use equipment, machinery, cars, etc. for business, oftentimes you can use the depreciation of that equipment as a tax write off.  Financial advisors use a set of fancy calculations to come up with the tax benefits of depreciation, we won’t go into that here.

Conclusion

Appreciating and depreciating assets both serve a purpose. It’s important to know the difference between the two and how to use each one as effectively as possible.

*Stocks can sometimes experience periods of volatility and negative performance. During such periods, the value of such stocks may decline.

**Be advised: talk to your accountant about specifics.

Jacob Sensiba
Jacob Sensiba

My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com

 

www.crgfinancialservices.com/

Filed Under: business planning, Investing, investment types, Personal Finance, Real Estate Tagged With: apperciating, Asset, assets, depreciating

When are Per Diem Payments Taxable?

September 2, 2020 by Jacob Sensiba Leave a Comment

per-diem-tax

 

Per diem payments are used when businesses have employees that travel. These payments are designed to relieve the employee from certain costs associated with traveling. Particularly meals and incidentals (ground travel, laundry, room service, etc.), and lodging.

This is great for both the business and the employee, but there are certain situations when per diem payments are taxable. In this article, we’ll explore exactly when an employee will pay per diem tax.

Two types

There are two types of per diem payments, meal-only, and meal and lodging. The names imply their use. One pays for meals, the other pays for meals and lodging.

It’s important that we specify the meals must be “non-entertainment related” meals.

Stipulations

As with many parts within the tax code, per diem rules are very specific. Meals and lodging have different rates.

Also, different cities have different rates. These differences are typically relegated to “big cities” and “small cities”, with bigger cities getting the larger rates. This is referred to as the high-low method. Businesses may also make payments based on the state in which you travel.

The per diem payments must be equal to or less than the federal allowable limit (depending on what method is selected). The employee is responsible for filing an expense report within 60 days. The expense report needs to include, date and location of the trip, purpose of the trip, and lodging receipts (if the meal-only option is selected).

You’re not allowed to “transfer credits”. What’s meant by this is if you use less on your lodging than is allotted, you can’t use the excess on food, or vice versa.

Tax Consequences

As I mentioned in the introduction, per diem payments can have tax consequences.

  • If per diem payments over the limit are taxable on the employee’s wages
  • If an expense report isn’t filed, or the filed expense report doesn’t include the required information, those per diem payments become taxable to the employee.
  • If the employer allows you, the employee, to keep whatever you don’t spend.

If you travel for business and receive per diem payments, just make sure you keep good records, and you hang onto your receipts. It’s better to have too much information than not enough.

Related reading:

Some Often Overlooked Tax Deductions for Busines Owners

Top 5 Overlooked Tax Deductions You Should Be Using

Why Financial Literacy is Important

 

*Be advised: Securities America and its representatives do not provide tax advice. Please consult a tax professional for specific information regarding your individual situation.

Jacob Sensiba
Jacob Sensiba

My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com

 

www.crgfinancialservices.com/

Filed Under: business planning, money management, Personal Finance, Tax Planning, tax tips Tagged With: per diem, Tax, travel

How to Grow Your Business Credit Score To New Heights

August 30, 2019 by Susan Paige Leave a Comment

Much like individuals, businesses also have their own credit score. This score is entirely separate from the personal credit score of whoever owns the business, and is used whenever the business would like to obtain a loan, line of credit, or other types of agreement in which a service is provided before payment is rendered. A business with a high credit score is seen as financially stable and trustworthy, while a business with a low score is often seen as unscrupulous and more likely to engage in shady practices.

To make sure you’re on the good side of the banking system, here’s how to grow a business credit score from non-existent to stellar:

Pay all your bills on time.

This is the most obvious and should be one of the easiest things to accomplish when it comes to raising your credit score. The credit history of your business is part of calculating your overall score. If you always pay your dues in full before they’re overdue and continue to do so for long periods of time, that’s a track record guaranteed to boost your score.

Decrease your credit utilization ratio.

For businesses that have a line of credit they can draw from at any time, the actual utilization of that credit must be low. If your business is always using 80% of its available credit, that isn’t a positive signal for your business. Banks much prefer credit utilization rates between 10%-20%, with minor upticks in usage acceptable as long as they aren’t held for long periods of time. If you have high credit utilization, but a lot of spare funds are lying around, consider using it to bring down your overall credit usage.

Take out a loan.

As counterintuitive as it might seem, taking out a loan that isn’t wholly necessary, but is entirely manageable can be a very effective and speedy boost to your credit score. If you never borrow money, how can a creditor assess how fit you are to pay the money back? If you look for a source for small business loans, you’ll notice these loans tend to be fairly agreeable in terms and conditions and aren’t too much of a financial burden to bear. Of course, this strategy only works if you make your payments on time and eventually repay the entirety of the loan. Consider it practice for when you start asking the bank for more serious sums of money.

Conclusion

At certain stages of the life cycle of a business, massive injections of cash from creditors are sometimes necessary. Whether it be to acquire a smaller competitor or upgrade your business to the next level, it’s good to build your credit score sky-high. Also, higher credit means a quicker approval time and lower interest rates, saving you both time and money. That’s something every good entrepreneur knows they could always use more of. This is why you must ensure your business operates in a way that creditors think they have a minimal risk by lending you money. Then, you’ll reap the fantastic rewards of good credit.

Filed Under: business planning Tagged With: Small business, successful business

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